βοΈπ 2024 NYC TLC Insurance Industry Overview: Is American Transit Too Big To Fail?
In Part 2 of our 2024 TLC insurance industry overview, we go over insurance market shares. We also share thoughts on why new players don't enter the market & recent inflation adjustments to driver pay
American Transit dominates TLC liability insurance market with 63% share, followed by Hereford (21%), Affirmative Direct (6%), Accident Fund (4%) & Maya (3%)
Note: TLC insurance data has discrepancies with NYC Open Data, but provides directionally correct market share data
Limited insurance options in TLC marketplace might continue and steps drivers & fleets can take to manage insurance costs & risks
TLC driver pay increase of 3.5% does not reflect increased driver insurance expense
In Part 1 of our 2024 NYC TLC Insurance Industry Overview, we went over liability insurance rate increases and whatβs causing premiums to go up between 10% to 30%+ (π) for many NYC for-hire (TLC) drivers and fleets. We also overviewed the three insurance pages most drivers and fleets receive and how claims are generally categorized in New York City and New York State.
Today, in Part 2 we wanted to provide readers with a market share breakdown of the major NYC TLC liability insurance companies. We also share our thoughts on why new players might not enter the marketplace. The end of February is a good time to do a market share analysis as renewal season is ending, so it gives a good βbeforeβ snapshot of the market before an annual inflection point.
Finally, we conclude our piece with discussions about (1) why new insurers might be hesitant to enter the TLC insurance marketplace, (2) how NYC drivers and fleets can manage insurance costs and risks, and (3) why the annual CPI-adjustment to the TLC Driver Minimum Pay formula is not capturing insurance inflation that drivers and fleets are experiencing.
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American Transit Remains Dominant Player In NYC TLC Liability Insurance
American Transit Insurance Company (βAmerican Transitβ or βATICβ) remains the dominant player in the NYC commercial for-hire transportation (TLC) liability insurance market. ATIC commands an over 60% market share, which is about triple the next largest company, Hereford Insurance Company (βHerefordβ or βHICβ).
American Transitβs size and influence in the NYC TLC insurance market makes Uberβs recent legal action against ATIC extremely noteworthy.
Affirmative Direct & Accident Fund Provide Insurance To Large TLC Rental Companies
Based on AutoMarketplace analysis, third place Affirmative Direct market share appears to mostly relate to American Lease, one of the largest TLC rental companies.
Accident Fund Insurance Company of America comes in fourth place. Based on our analysis a large portion of Accident Fundβs NYC TLC liability market share relates to large TLC rental companies Fast Track and Buggy, which are now both owned by Voyager Global Mobility (VGM). In addition, based on a recent discussion with INSHUR Co-Founder & CEO Dan Bratshpis, our guess is Accident Fundβs non-fleet policies might relate to INSHUR.
Maya Assurance Company (βMayaβ or βMACβ) and INSHUR round out the βTop 6" NYC TLC liability insurers and mostly appear to focus on individual drivers.
Based on AutoMarketplace analysis the seven largest TLC insurance companies account for ~99% of all non-taxi TLC liability premiums. Itβs similar when you include yellow cabs, with the ten largest TLC insurers accounting for ~99% of all TLC liability policies.
Accuracy Of TLC Insurance Data
Before we summarize our insurer market shares below, please note that the publicly available TLC insurance dataset should be viewed as imperfect. We think it gives directionally correct market shares, but there are notable inconsistencies vs. other public data disclosures.
For example, the very reliable NYC OpenData active non-taxi for-hire vehicle (FHV) list, updated once per day, currently has ~109,000 listed TLC-plated vehicles, while the latest TLC insurance sheet shows ~101,000 active non-taxi FHVs. Obviously, thatβs a significant unexplained difference. For our market share analysis, weβve used the February 13th TLC insurance data set, where it lists ~105,000 non-taxi NYC FHVs.
Why Arenβt There More Choices?
If you want to do a quick Total Addressable Market (TAM) or overall commercial liability insurance premium opportunity for the NYC TLC market it would roughly look something like the below calculation. Remember, this excludes the comprehensive & collision insurance opportunity.
~115,000 policies * $5,500 avg. weighted policy = ~$630 million in NYC TLC liability premiums
(Note: $5,500 is an estimate based on market knowledge and weβre illustratively assuming no growth in this market sizing exercise)
Using this figure you can also estimate what the TLC insurance broker revenue opportunity is.
~$630 million in NYC TLC liability premiums * 7% broker commission = ~$45 million of broker revenue
So, one might wonder why donβt GEICO, Progressive, USAA, Allstate or State Farm get into the TLC insurance marketplace? Itβs a big enough niche, right?
The way, we believe, you have to think about it is as follows:
Q: Is NYC for-hire commercial liability insurance an attractive market to underwrite? What are the growth prospects? (βCan we make money? How much?β)
Firstly, premiums = gross revenue, which is not profit. Many people have gotten into a bad habit of saying a company βmakesβ $X, but are actually referring to revenue, not profit. So, while ~$630 million premiums are up for grabs, can one make money or will the cost of running an NYC TLC insurer result in losses?
In Part 1 we went over the complexity of operating an auto insurance company in New York State, a no-fault (PIP) state, and whatβs causing TLC premiums to increase 10% to 30%+? We also recently wrote about Uberβs efforts related to pushing for increased regulation of New Yorkβs βlawsuit lendingβ or βcar accident loanβ industry, which is also increasing the cost of insurance.
Finally, in our article about Uber suing American Transit we mentioned a 2021 S&P Global report that questioned whether TLC insurance giant American Transit was solvent (i.e., can they payout the claims they owe or prospectively owe?). Basically, a lot of insurance market headwinds.
For example, another way to think about the situation at American Transit is if a long time industry player, with an extremely dominant market share (60%+) and deep industry expertise, cannot profitably operate how can a new entrant, that will have a much smaller market share initially, succeed?
Furthermore, if the dominant player can continue to operate with razor thin margins for years (or is indeed effectively insolvent), that is a nightmare competitive backdrop. Right now, our guess is Warren Buffett-controlled GEICO is probably not interested in the NYC taxi insurance market.
American Transit might be too big to fail. Or said another way, impossible to effectively compete with.
This is why the TLC insurance market lends itself to an incumbent monopoly or duopoly market share structure, at the moment. The exception perhaps being offshoot self-insured fleet βcaptivesβ of large TLC rental companies that might be large enough to experiment with self-insurance, at least for a couple of years.
In terms of growth, you might have a few thousand (hopefully) more yellow cabs come online or some more TLC plates get released, but fundamentally the market is a bit zero-sum and low growth now, especially when you include TLC Plate attrition. In other words, premium increases will mostly expand the market, not new policies.
Practically speaking, for at least a couple of years, NYC TLC drivers and fleets should not expect a lot of new insurance options to become available. We would be glad to get this prediction wrong.
Q: If the status quo TLC insurance market remains, what are your options? What can a NYC driver or fleet do?
What NYC TLC drivers and fleets can do is simply reduce the probability of getting into at-fault accidents or accidents in general. In addition, getting good at documenting events and keeping records is important. For example, ask your broker for your loss runs at least once a year.
All TLC-plated vehicles should be equipped with, at the very least, outward facing dash cameras, which are very helpful in an insurance claims process and protects drivers and fleets from unfair accusations as well. NYC TLC drivers and fleets should also be on top of maintaining their vehicles from ensuring tires are correctly inflated / have appropriate tread to other maintenance basics (i.e., coolant level checks, control arms, brakes, etc). Keep and file all maintenance and repair records.
Remember, as many of our readers know, weβve run a fleet of BMWs, Cadillacs and Mercedes-Benzes in the NYC TLC market. Weβve gone over two million miles in expensive luxury vehicles, weβve seen a lot, weβve spent a lot and our advice is based on real life NYC βstreetβ experience. We know itβs tough to stay on top of everything, but itβs necessary and it will pay off. You need to protect yourself and your small business (whether thatβs one vehicle or if you run a fleet).
If you do get into an accident, which is sometimes unavoidable, make sure you document everything. Get the other driverβs documentation, call the police if appropriate, take videos and picture at the sceneβ¦stay calm. If no police report is filed, make sure to file an MV-104, inform your insurance broker immediately and start working on the claim. Our team has (will continue to) create insurance-related videos which we share below, to try to make common insurance admin easier.
Fighting TLC Insurance Inflation
Back in February 2022, we wrote an article that suggested (Note: not investment advice) investing in assets like Bitcoin, might be a good way to fight insurance inflation. It actually would have worked out well, but weβre not going to get into that right now. We mention it because this topic has been on our mind for years and weβve really thought deeply about how to combat TLC insurance inflation, especially as it related to operating our own fleet.
Insurance expense is a major cost center for both drivers and fleets in NYC. For example, the cost of insurance generally represented over 30% of our total fleetβs revenue. Recently, we mentioned that TLCβs ~3.5% CPI-inflation adjustment to TLC Driver Minimum Pay didnβt accurately reflect the cost of doing business as a NYC TLC driver.
This is easy to understand when you weight expenses vs. use a regional inflation index that measures a general basket of goods and services. To be simple, if youβre an NYC taxi driver, inflation related to TLC insurance, vehicle maintenance, car repairs and the cost of new & used vehicles are going to impact you much more than it would an individual who works from home.
This is why we also believe Uber and Lyft should be subject to a NYC TLC-specific inflation index, so the TLC Driver Minimum Pay formula would more accurately reflect the cost of doing business.